DCIT 3(1), MUMBAI V. BOMBAY MARINE ENGG. WORKS P.LTD, MUMBAI

ITA 6374/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1653 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK KUMAR SINHA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 6374/MUM/2011(A.Y. 2007-08) THE DCIT, CIR. 3(1), ROOM NO.607, 6 TH FLOOR, AAYKAR BHAVAN, MUMBAI - 20. (APPELLANT) VS. M/S. BOMBAY MARINE ENGG. WORKS PVT. LTD., PLOT NO.1/1, UNIT NO.13, LAKRI BANDAR, DARUKHANA, MUMBAI - 400 010. PAN:AAACB0451 (RESPONDENT) APPELLANT BY : SHRI DEEPAK KUMAR SINHA RESPONDENT BY : SHRI NITESH JOSHI DATE OF HEARING : 01/01/2013 DATE OF PRONOUNCEMENT : 04/01/2013 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-7, MUMBAI DATED 10/05/2011 FOR THE ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL RAISED BY THE REVEN UE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,55,25,000/- MADE U/S 2(22)(E) OF THE I.T.ACT, 1961 HOLDING THAT THE ASSESSEE COMPANY WAS NOT HAVING ANY SHAREHOLDING IN THE LENDER COMPANY AS SUCH THE LOAN S TAKEN FROM THE LENDER COMPANIES CANNOT BE TAXED IN THE HANDS OF THE ASSES SEE COMPANY AS DEEMED DIVIDEND. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,55,25,000/- MADE U/S 2(22)(E) OF THE I.T.ACT, 1961 WITHOUT REALIZING THE FACT THAT SHAREHOLDERS C ANNOT BE TAXED U/S.2(22)(E) IN VIEW OF CBDTS CIRCULAR NO.495 DATED 22.09.1987 AND APPLICABLE FOR A.Y.1988- 89 AND SUBSEQUENT YEAR WHEREIN IT IS STATED THAT DE EMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CONCERN WHERE THE FOLLOWING CONDITIONS ARE SATISFIED: I) WHERE THE COMPANY MAKES THE PAYMENT BY WAY OF LO ANS OR ADVANCES TO A CONCERN; ITA NO. 6374/MUM/2011(A.Y. 2007-08) 2 II) WHERE A MEMBER OR A PARTNER OF THE CONCERN HOLD S 10 PERCENT OF THE VOTING POWER IN THE COMPANY; AND III) WHERE THE MEMBER OR PARTNER OF THE CONCERN IS ALSO BENEFICIALLY ENTITLED TO 20 PERCENT OF THE INCOME OF SUCH CONCERN. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT W AS NOTED BY THE AO THAT THE ASSESSEE COMPANY HAD RECEIVED UNSECURED LOANS FROM M/S.KALKAJI TRADING COMPANY AND M/S. GURGAON TRADING COMPANY PVT. LTD. AMOUNTIN G TO RS.1,15,00,000/- & RS.40,25,000/- RESPECTIVELY. THE AO FURTHER NOTICE D THAT MS. GEETA CHHABRA WAS HAVING 92.9% SHARES IN M/S. KALKAJI TRADING COMPAN Y AND IS ALSO HAVING 57.9% SHARE IN M/S.GURGAON TRADING COMPANY PVT. LTD. SHE WAS ALSO HOLDING 83.1% SHARES OF THE ASSESSEE COMPANY. HOWEVER, THE ASSESSEE COM PANY IS NOT HOLDING SHARES OF ANY OF THE AFOREMENTIONED TWO COMPANIES. THE AO INVOKE D PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT,1961(THE ACT) AND ADDED BOTH THE AFOREMENTIONED AMOUNTS TO THE ASSESSABLE INCOME OF THE ASSESSEE. LD. CIT(A) HAS DELETED THE DISALLOWANCE FOLLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE C ASE OF BHAUMIK COLOUR (P) LTD., 313 ITR (AT) 146, IN WHICH IT HAS BEEN HELD THAT TO INVOKE SECTION 2(22)(E) OF THE ACT PAYEE SHOULD BE REGISTERED AS WELL AS BENEFICIAL S HAREHOLDER OF THE PAYER COMPANY. LD. CIT(A) HAS RETURNED A FINDING THAT THE ASSESSEE COMPANY HAS NO SHARE OF THE LENDER COMPANIES. LD. CIT(A) HAS ALSO RELIED UPON DELHI HIGH COURT IN THE CASE OF CIT VS. ANKITECH PVT. LTD. 242 CTR 129, WHEREIN SIMILA R POSITION OF LAW HAS BEEN UPHELD. 3. AFTER NARRATING THE FACTS, LD. DR RELIED UPON TH E ORDER PASSED BY AO AND SUBMITTED THAT THERE WAS COMMON SHARE HOLDER OF AL L THE THREE COMPANIES, THEREFORE, AO WAS RIGHT IN INVOKING SECTION 2(22)(E) OF THE AC T AND LD. CIT(A) HAS WRONGLY DELETED THE ADDITION. 4. ON THE OTHER HAND, RELYING UPON THE FACT THAT AS SESSEE COMPANY DOES NOT HAVE ANY SHARE IN AFOREMENTIONED TWO COMPANIES AND ALSO THE AFOREMENTIONED DECISIONS OF SPECIAL BENCH AND HONBLE DELHI HIGH COURT LD. AR CONCLUDED THAT RELIEF HAS RIGHTLY BEEN GRANTED BY LD. CIT(A). LD. A.R ALSO RELIED UP ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICATE PVT . LTD., 324 ITR 263 (BOM). ITA NO. 6374/MUM/2011(A.Y. 2007-08) 3 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTE NTIONS HAVE CAREFULLY BEEN CONSIDERED. THE FACT THAT ASSESSEE COMPANY DOES NO T HAVE SHARE OF THE LENDER COMPANIES IS NOT DISPUTED BY THE REVENUE. THE AFO REMENTIONED DECISION OF SPECIAL BENCH IS CLEAR THAT SECTION 2(22)(E) CANNOT NOT BE INVOKED UNLESS THE RECIPIENT IS BENEFICIAL OWNER AS WELL AS REGISTERED OWNER OF THE SHARES OF THE LENDING COMPANY. THIS POSITION OF LAW HAS ALSO BEEN ACCEPTED BY HON BLE DELHI HIGH COURT IN THE AFOREMENTIONED DECISION AND HONBLE JURISDICTIONAL HIGH COURT HAS ALSO NOT EXPRESSED ANY DISSENT WITH THE AFOREMENTIONED DECISION OF SP ECIAL BENCH THOUGH IT WAS NOTED BY THEIR LORDSHIP IN THE AFOREMENTIONED DECISION IN T HE CASE OF CIT VS. UNIVERSAL MEDICATE PVT. LTD. (SUPRA). IN THIS VIEW OF THE SI TUATION, FINDING NO INFIRMITY IN THE RELIEF GRANTED BY LD. CIT(A), WE DISMISS THE DEPART MENTAL APPEAL. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH DAY OF JAN.2013 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 4TH JAN.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R B BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.